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Most Americans are behind on their retirement savings—here are some tips to catch up

CNBC Select spoke with Brandon Renfro, a Texas-based certified financial planner, about ways to boost your savings. If you're behind on savings goals, here are four tips.

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According to retirement-plan provider Fidelity Investments, you should have saved the equivalent of 10 times your income by age 67 to have a comfortable retirement. This works out to about $544,440 in savings based on the U.S. Bureau of Labor Statistics' median American earnings data, and many experts will say you need $1 million or more.

It's a little daunting to imagine saving half a million dollars or more, so experts at Fidelity suggest you should aim to hit smaller savings benchmarks throughout your life. Fidelity's rule of thumb says you should have the equivalent of one year's salary in the bank by age 30, which would be about $40,508 according to median U.S. earnings.

But many of us fall short of that goal, a 2020 TD Ameritrade report finds. The survey, which polled 2,000 U.S. adults ages 40 to 79 with at least $25,000 in investable assets, reveals that only 14% of 60-somethings have more than $500,000 saved.

Meanwhile, one in five people (20%) in their 70s have less than $50,000 in the bank, and two-thirds (66%) of 40-somethings have less than $100,000 saved for retirement.

"Having one year's income of accumulated savings by 30 is a very achievable goal, but I don't think most hit it," says Brandon Renfro, a Texas-based certified financial planner. "A major reason is simply a delayed start." 

If you're feeling behind on your savings goals, Renfro has tips to help you catch up. 

Consider your savings rate

First focus on your savings rate to help make up the difference says Renfro. Fidelity projects that saving 15% of your salary starting at age 25 is more than enough to put you on track for retirement. Using a percentage, rather than a dollar amount, means that as your salary goes up, in theory your savings will, too.

For instance, saving 15% of a $40,000 salary works out to $6,000 per year, or $30,000 over five years. And if you invested the money in a retirement account, like a 401(k) or IRA, it's growing year-over-year. Ideally, the money in your retirement investment account is earning anywhere between 5 and 8% in annual returns — of course that can go up and down depending on the market, but that's why investing for retirement is a long-term plan.

But if you're just starting to save at 30, you've missed out on five years of saving, plus all the interest you could have earned. To catch up, you'll need to think about saving more than 15% in order to make up for it. Start now, contribute what you can presently afford and stay consistent.

"Don't try to do it all at once," says Renfro. "So if you just turned 30, maybe plan to get back on track by 35." Look at your budget and see what savings rate you can afford. If it's realistic, put aside 5%, 10% or even 15% like experts suggest. Then, try and increase this percentage using a few of the suggestions below.

Avoid lifestyle inflation

If you've only started saving in your 30s, there's still plenty of time to catch up. This is the decade to kick your career into high gear and seek out opportunities and promotions that can propel you from making entry-level wages to comfortable earnings. As you advance in your career and earn more money, you can increase the amount you save, especially if you avoid lifestyle creep.

If you get a big raise, celebrate by bumping up your savings rate before buying a new car or booking a big vacation. One way to enjoy your success is by making sure your future self is well taken care of. Even if you just get a cost-of-living increase of 3%, consider putting 2% toward your retirement and pocket the 1%.

Look for other ways you can divert spending toward retirement savings. "For example, you can pay off a car and redirect your car payment into an IRA or increase your employer plan savings," says Renfro. This approach works well because if you're already used to making a car payment, then putting it toward your savings won't feel like you're cutting into your spending money.

If you don't have an employer-sponsored account, set up an automatic transfer from your checking account into a savings account so you don't even think twice and try to spend it.

Take advantage of free money

While it might seem daunting to think about working up to a 20% savings goal, an easy place to start is with your employer's matching contributions, says Renfro.

"Make sure you contribute enough to get every matching dollar available," Renfro tells CNBC Select. A 5% employer match could get you from a 10% savings rate to 15%, at no cost to you whatsoever.

And if your current employer doesn't offer matching contributions, consider this perk when you think about your next career move. 

"For someone nearing 30, a retirement plan with even a slightly higher match will make a huge difference in savings over the course of a career," says Renfro. You still have a few decades to earn on that money, so a 1% to 2% increase in matching will add up over time.

Aside from employer contributions, consider investing any potential cash windfalls into your retirement account. A common example is your tax return. But you might also receive a year-end bonus, family money, wedding gifts or cash from selling an asset, such as a car. 

Understanding the ins and outs of retirement accounts

With retirement accounts, such as 401(k)s and IRAs, there are contribution limits to consider. So while you might want to rapidly increase your savings to make up for lost time, there's only so much you can put into these accounts. In 2020, people under age 50 can contribute up to $19,500 to your 401(k) account, and up to $6,000 to your IRA account.

There is also steep penalty to withdraw money from a traditional, or pre-tax, 401(k) and/or IRA account before the age of 59 and a half. You can withdraw the after-tax money you've contributed to Roth 401(k) and Roth IRA before retirement penalty-free, but you must wait until age 59 and a half to dip into the earnings. With some IRA accounts, there is a fee for using the money before you've had the account open for five years.

With that in mind, you should do your best to avoid withdrawing from these accounts. While you might be eager to build up your retirement savings, it's important to remember that retirement doesn't have to be your only financial goal. It's also important to have a healthy emergency fund and a clear plan to pay off your debt. All of these are important when thinking about having a healthy financial future. 

How to start saving

Even if you don't have a lot of extra cash after paying your bills, anything you save now will grown thanks to the power of compound interest. When you're not ready to invest yet, a high-yield savings account is a good place to stash your money. You can earn a higher average interest rate (APY) than traditional accounts, which are currently around 0.05%

You don't need to start with a lot. Setting up a weekly $20 direct deposit from your checking account into a high-yield savings with an APY of about 1% would help you save $1,000 in about a year. Doubling it to $40 per week would save you $2,000 per year. Yes, that's not $40,000, but it's a start. And over time, you can increase the amount you save with extra cash you get through tax returns or year-end bonuses or by bumping up your monthly contribution by 1 percentage point or $5 per month or whatever you think you can afford.

To get started, look for a high-yield savings account that has zero monthly fees and no minimum deposits or balance requirements.

CNBC Select's top pick is Marcus by Goldman Sachs High Yield Online Savings, with no fees whatsoever and easy mobile access. It is an easy-to-use, straightforward savings account for when you're just getting started.

Marcus by Goldman Sachs High Yield Online Savings

Information about the Marcus by Goldman Sachs High Yield Online Savings has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Goldman Sachs Bank USA is a Member FDIC.
  • Annual Percentage Yield (APY)

    0.50%

  • Minimum balance

    None to open; $1 to earn interest

  • Monthly fee

    None

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

    None

  • Overdraft fees

    N/A

  • Offer checking account?

    No

  • Offer ATM card?

    No

Terms apply.

The Ally Online Savings Account, which currently offers a higher APY and also comes with no fees, is another popular choice. Account holders can put their money into different "buckets" within the same savings account, so it's very easy to plan ahead for multiple goals. For example, you can create a designated fund for a down payment and another for emergency savings. If you're looking for a way to stay motivated and remind yourself of the good things to come, this feature might help you stay on track.

Ally Bank Online Savings Account

  • Annual Percentage Yield (APY)

    0.50%

  • Minimum balance

    None

  • Monthly fee

    No monthly maintenance fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

    $10 per transaction

  • Overdraft fees

    $25

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes, if have an Ally checking account

Terms apply.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.